I’m rather fascinated right now by a man
named Ulrich Bettermann. In pictures, he’s an unprepossessing, old, somewhat
overweight German man. There’s very little about him on the Internet in
English, which is odd, considering the stature he has. In case you’re wondering
who Herr Bettermann is, and your German is not up to scratch, then listen up.
Ulrich Bettermann’s adventures read like
they’re off a thriller, and for good reason. Remember the Russian businessman
Mikhail Khodorkovsky? He was once the richest man in Russia, until he crossed
Vladimir Putin and was then thrown into the gulag for ten years. When Putin
released Khodorkovsky abruptly last December, Bettermann is the man who
dispatched his private jet to pick him up in Russia and transport him to
Germany. And this is not the only exciting moment Bettermann has had. The man
who had requested for the jet was Hans-Dietrich Genscher, the former German
Foreign Minister. Back in the 1980s, Genscher and Bettermann had been caught in
accidental crossfire between Iranian and Iraqi forces in the first Gulf War, including
their hotel being targeted by a Scud missile in the middle of the night.
The point about all this is not to illustrate
how Herr Bettermann is an adventurer. It has to do with the nature of his
day-to-day job, which is as chairman of a company known as OBO Bettermann. It
is a manufacturer of what it calls (in typical German fashion)
‘electrotechnical’ infrastructure. This sounds dull, but it has vaulted the
century-old company to revenues in excess of 400 million Euros, 30,000 product
lines and offices and operations in dozens of countries. It is the classic
German ‘mittelstand’ company, and the mittelstand has been the engine of German
economic growth for decades.
Many definitions exist about what companies
actually constitute the mittelstand, but there is agreement that the typical
mittelstand company will have revenues in the millions of Euros. They typically
produce machine tools, intermediate goods (such as OBO Bettermann), and have a
focus on producing for export. Many (including, again, OBO Bettermann) are
family-owned, and focus on one product or line. Many credit them for powering
the German economic engine, and provide a large proportion of employment in the
country.
Why is this important to us? Many have said
that Kenya, and East Africa, needs to grow its small and medium enterprises, if
we are to solve the vast unemployment crisis in the country and the region.
Not to blow our trumpet, but the Business
Daily’s ‘Top 100’ makes a start in identifying and celebrating these companies,
but what the survey does is just a beginning. For us to be truly competitive,
we need to look at what makes Herr Bettermann and his ilk such formidable
competitors.
The first thing is that these companies do
not just compete at national or local level. Many of them are global leaders in
what they do, and they are the default choice for quality and precision. Even
when there’s cheaper competition (especially from China), companies such as
Heidelberg (in printing) and Schoder GmbH (which produces precision engraving
tools) are still global leaders.
Second, the German education system, with
its emphasis on hands-on skills and apprenticeships, ensures that these
companies get the workers they need, with the right sets of skills, training
and experience. The desultory manner with which we treat all aspects of our
education fills economic planners with the shivers, as the education system
becomes almost totally detached from the needs of the marketplace.
The third is the importance of longevity.
OBO Bettermann is a hundred years old, and many companies in the mittelstand
are decades old. Such longevity (without distracting mergers and spinoffs)
enable these companies perfect their craft, and innovate to an admirable
degree.
The fourth lesson, which is a rather
contrarian one, comes from Brazil. Brazil also has a legion of SMEs, which the
government has tried to encourage. However, what has happened is the classic
case of perverse incentive. The government created a simplified tax system for
smaller companies (similar to the KRA’s turnover tax for companies with
turnover lower than KSh 5,000,000). It helped bring lots of companies out of
the shadows and into the formal environment, which was a huge success for the
Brazilian government. However, what it soon realised is that these companies
were reluctant to get out of this bracket, which restricted the growth of the
Brazilian economy and its ability to absorb a growing labour force.
Many countries are fond of extolling their
SME sector, seeing it rightly as the source of growth and jobs. Few, however,
have been as successful as Germany in actually supporting the sector. Outside
of rhetoric, the government supported the mittelstand through a programme
called Kurzarbeit (literally ‘short time work’), which enabled smaller
companies keep workers through the recession, instead of having to lay them off
to conserve competitiveness.
What’s clear is that Kenya and East Africa
needs its own support mechanisms for these companies. Maybe in a few years, the
fascinating adventurer-cum-captain of industry will actually have been born in
Machakos, not Menden.
This article was also published in the Business Daily on April 29, 2014 at http://www.businessdailyafrica.com/Opinion-and-Analysis/How-Kenya-can-turn-SMEs-into-growth-engines-like-Germany-did/-/539548/2296494/-/vhffekz/-/index.html
Comments
Post a Comment